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The ETF Book: All You Need to Know About Exchange-Traded Funds, Updated Edition by Richard A. Ferri

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CHAPTER 21

Operational Tips for ETF Investors

Managing your exchange-traded fund (ETF) portfolio can be a smooth evolution or a frustrating experience. A lot depends on where you choose to trade and how you trade. Investing in the ETF marketplace without a plan will likely result in higher costs because you will not get good trade execution when buying and selling funds. Your cost of investing can be minimized with just a few trading tips.

An alternative to managing your own account is to hire someone else to do it for you. That can be accomplished through the brokerage firm where you trade or through a fee-only registered investment adviser (RIA). A fee-only RIA is compensated at a percentage of assets under management rather than by trading commissions. In either case, hiring a professional adviser to design, trade, and manage a portfolio is often a better solution for investors who are not interested in managing their account or who are not able to manage their account any longer.

Selecting a Custodian

ETFs trade on stock exchanges. As such, ETFs can be purchased only through an NASD registered brokerage firm. You can use a full-service brokerage firm such as Merrill Lynch or Smith Barney, or choose a discount brokerage firm such as Charles Schwab or TD Ameritrade. There are advantages and disadvantages to each type.

A full-service brokerage firm has the advantage of a dedicated representative. You will always talk to the same person when you call. The registered rep should ...

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